Pharma and the Paradigm of "Brand"

The pharmaceutical industry is, among many other things, really slow to change. It's been working with the same cognitive makeup since the Industrial Age, right around the time the first direct-to-consumer advertising campaign for a drug brand was launched in 1917.

That's not a typo.

The first real DTC ad to create demand for a drug wasn't from Schering-Plough in 1997 for Claritin. It was for Bayer Aspirin, when they began advertising directly to American consumers on February 19, 1917, just before the expiration of the aspirin patent.

The ad appeared in the New York Times, positioned on the idea that Bayer was the "One Real Aspirin" brand consumers should trust, primarily because its manufacturing process would ensure drug purity and protect them against dangerous, ineffective or impure copies.

Here's the ad:

So direct-to-consumer promotion and manufacturing have been dominant forms of thinking about strategy and defense by drug companies since you could buy a Model T Ford for $360. Said differently, the pattern of energy in the system hasn't changed in more than a century.

The firing-and-wiring impacts of our psychic structure flows from the view of an industry that sees itself as being all about drug. (PwC was among the first to publish about the drug industry's need to engage in some serious soul searching about its identity. This is a link to their thought leadership, which came out last year: Pharma's Identity Crisis.)

The Reaction Wheel

The great supporting trunk of the industry's worldview is being crosscut with amazing speed and efficiency. Despite this, drug companies continue to take refuge in a remnant context. Here's a look at how well that market understanding has worked for dozens of drug brands trying to preserve revenue following patent loss from 2010 - 2014. Data is from IMS Health's National Prescription Audit.

The totality of things brought to bear to solve a suddenly "urgent" patent challenge were all framed within the structure of a market defined as being in the business of promoting what a drug does, its feature/benefit story. The metrics in the system reinforce each other, creating a Pavlovian feedback loop perpetuating a predictable and scripted reality. Here's a piece in the Financial Times that narrates surprise and angst across the industry as it tries to deal with the patent cliff in 2012, where "nothing like this has ever been seen before."

Let's see how 2012 turned out:

I'm not the first person to illuminate what happens when a drug loses its patent. My point is this: there was (is) an entire industry subsystem of scientists, regulators, analysts, vendors, observers, consultants and agencies guided by a ritual of behavior, a set of strategic crutches and standardized approaches to problem solving, that clearly didn't work to 'save the brand' (or branding?) from collapse.

You could say the drug industry is kinetically-trapped in a system of thought. So the results were (are) stupefyingly undifferentiated.

The cycle repeats in 2014, with identical results:

This is a calcification that runs deep in the mental circuitry. Billions are on the table for those who can break out of the mind rubble.

Strategic (vs. Digital) Transformation

There are many ways to approach this whole business of transformation, to navigate the transition space to a different form of market strategy (see here for one framework, The Magic Leap to New Value). But the jumping-off point should be with thinking and ideas whose effects register at the self-foundation. Without rewiring its mental circuits as quickly and thoroughly as possible, creating a new industry model for 'drug companies' will become like driving in New Jersey: you can't get there from here.

The unprecedented in-rush of digitization has created a shift that maps out as a stark rupture on the historical timeline. It calls for moving to a whole different orientation. Sven Birkerts, an American essayist, describes it this way:

"We are all looking to acclimate to signals, data, and networks, developing new habits, new reflexes."

Negotiating new assumptions about value, attitudes and identity gets right to the core questions about adapting to societal transformation by all things digitally-enabled. Where we formerly could be said to interact with various systems separately (be they market, business, legal, political, regulatory or technological), now those systems are, in effect, merging into one.

The outward ripple dissolves boundaries. The unwieldy gargantuan unity is subsuming many into one, and it is happening right before our eyes. The strategic effect is that we have killed off the independent sphere. The new market space is designing entirely new systems of health.

My Value is Better Than Your Value

The latest chapter in the Sisyphean struggle the pharmaceutical industry has been having with the world comes in the form of new conflict about the "value of medicine" with two of its biggest customers: payers and PBMs. Here's a great summary of PhRMA's fusillade launched last week, written by Ned Pagliarulo at BioPharmaDive: PhRMA takes shot at payers in drug pricing war. (That the drug industry is choosing to take on both at the same time is a separate conversation.)

The Pharmaceutical Care Management Association, the PBM trade group, counters with a big initiative of its own about the 'value of PBMs' in controlling drug costs.

Among their proposals are a shortened biologic exclusivity period (to seven compared to the current 12 years), stepped-up generic competition, and pushing to end requirements that insurance plans pay for all drugs in certain classes under Medicare, regardless of price. They're promising to save the U.S. healthcare system nearly $100 billion. Here's some context: PBMs Counter Pharma's Pricing Blame.

In other words, the two are basically arguing that 'my value is better than your value.' Not included here are the billions at risk to drug companies from the rise in demand for performance guarantees by payers.

A billion here, a billion there; sooner or later, we're talking about real money.

Collaboration and coordination, not conflict, are elemental to competing on value. Healthcare is a nested market; it's not one thing that will change outcomes, it's many things simultaneously and interactively. Everyone has a piece that has "shown promise to improve _______."

The roadmap for transformation in healthcare runs through entirely new systems of engagement, population health management as a form of market strategy, and continuous consumer engagement, at scale. It is led by a new type of design thinking that goes beyond individual objects, environments, and organizations to achieve impact at a system level.

"The dysfunction of our modern health care system isn’t about failure of intention, but rather pursuit of siloed and sometimes conflicting priorities" -- Stacy Chang, Health Care: A Final Frontier for Design 

Which begs the question: What if the elephant in the room is the room itself?

/ jgs